What Is An Apartment Owner's Undivided Share In Land?

A large number of people decide against buying an individual plot and invest in apartment buildings due to a variety of benefits these modern modes of residence offer. However, there is a lot that sees it differently. With time the structure gets old, and the worth of the property is sure to go down along with that. If that is the case, why should a homebuyer opt for an apartment? This would be an ill-founded notion to start with.

Buyers of apartment flats, as a matter of fact, do not buy a structure alone ─ they also buy a part of the land upon which that structure stands as a part of the deal. This ownership over land is known as a homebuyer’s undivided share in the land (USL). Now, this is precisely why the value of such a property i.e. an apartment unit increases with time, despite the fact the structure gets old day by day and its condition deteriorates by and by.

Since the worth of unit in a housing society is decided by the undivided share of a buyer, they should be acutely mindful of this and have a clear idea about this before investing.

When you are going for an apartment purchase…

In a standard buyer-seller or builder-buyer agreement, a buyer’s undivided share in the land is clearly mentioned, either in percentage terms (say, one per cent) or in a specific area (say, 500 sqft). To ensure you are being given your rightful share in that matter, you could do a simple math and arrive at that.

What is UDS?

UDS is the ratio of the size of one apartment to the total built-up area of all the apartments. This means the sum of all the property holders USL will be equal to the entire land size.

In a comparatively small set up, you could arrive at your share by doing this simple calculation.

Suppose, you have invested in a housing project spanning in areas of 1,000 sqft which has 10 units, each measuring 100 sqft. In this case, each buyer will have 100 sqft as their undivided share in land.

In a bigger and more complex setup, however, your USL will be proportionate to the size of your apartment.

Suppose you have a 2BHK flat in a housing society that has a total of 100 flats - 50 of them 1BHK, 30 are 2BHKs and 20 are 3BHKs. The constructed area of a 1BHK flat is 500 sqft, 2BHK is 1,000 sqft, and 3BHK is 1500 sqft.

So, the total land area of the society would be:

(50 x 500) + (30 x 1000) + (20 x 1500)

=> 25,000 + 30,000 + 30,000

= 85,000 sqft.

Your undivided share of land in the society (for owning a 2BHK flat) would be:

1,000 / 85,000 x 100 = 1.18 per cent

Similarly, the undivided share of land for a person owning a 1BHK flat would be:

500 / 85,000 x 100 = 0.59 per cent

And, the undivided share of land for someone owning a 3BHK would be:

1,500 / 85,000 x 100 = 1.77 per cent

Note here that this formula does not apply to co-operative housing societies, where each member has an equal UDS, irrespective of their unit size. In co-operative housing societies, members are the shareholder of the society with which lies the UDS.

Why you must get this calculation right?

Because it is your right: Since the worth of your property is primarily decided by your undivided share in land in an apartment building, it becomes needless to state that utmost care must be taken to make sure the sale is clearly mentioned in the builder-buyers agreement. If your personal calculation in this regard is different from the developer’s, you are within your right to confront him about it and get the error rectified.

Because it decided the legality of the structure: The legality of a housing project also depends on whether UDS is in compliance with the FSI (floor space index) permitted to the developer. A look at your undivided share in land and such detail would reveal the illegality of a structure.

Because it is a criterion to get a home loan: In case you are taking a home loan, the bank will look for the UDS while granting you credit. In case you are buying a property in resale, they will check for the share certificate from your housing society along with other documents to process your request for a home loan. At the time of property registration, too, the sub-registrar would check the share certificate. The property/home loan insurer would go for a similar exercise.

Because future depends on it: In case of a natural calamity, a buyer is compensated depending on his UDS. The same is true if, for a reason, the government decides to acquire the land and take down the project or the project is taken up for redevelopment. But naturally, you will have to show proof of your USL in case you decide to sell this property in the future.

Should you accept lower UDS to save costs?

While having a large UDS is what a buyer should look for, there have been cases where homeowners showed the willingness to accept lower UDS in order to save cost.

At the time of property registration, the buyer has to pay the stamp duty for both, the UDS and the structure. In some states such as Karnataka and Tamil Nadu, for instance, buyers of under-construction properties have to pay the stamp duty in two tranches. First, the property is registered in the name of the buyer, keeping in mind his UDS, referred to as “first ownership”. When the entire structure is complete, the property is registered for the second time, and this time the duty is calculated for the entire property value. Showing a lower UDS in property papers would thus mean lower stamp duty outgo.

However, this shortsightedness would cost you dear at the time when you have to part with your property for any reason mentioned above. In your best interest, go for your rightful share.

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makaaniq is an initiative by makaan.com to provide information, intelligence and tools to help property seekers and real estate industry players take an informed property investment decision.makaan.com is part of elara technologies pte limited, singapore which also owns and operates proptiger.com, a digital real estate marketing and transactions services provider. news corp, a global media, book publishing and digital real estate services company, is the key investor in elara. elara's other major investors include saif partners, accel partners and RB Investments.

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